Finance Minister Arun Jaitley is currently offering his Union Budget speech today and speculations began to mount whether there would be a restructuring of income tax slabs.
If it happens, the move may come as a breath of fresh air for the salaried and the middle class.
India’s income tax slabs now
Now Indians in the lowest personal annual income slab of Rs 2.5 lakh-Rs 5 lakh pays a tax of 5 percent while individuals who fall under the highest income slab of Rs 1 crore and above, pay a tax of 30 percent.
Individuals having a personal annual income of between Rs 50 lakh and Rs 1 crore pay surcharge of 10 percent of their income tax amount. Should any individual’s personal income to be above Rs 1 crore, the surcharge of 15 percent is liable on their income.
However, regardless of the bracket taxpayers fall in, they pay a cess of 3 percent of the total of their income tax and surcharge amounts.
Until 2016, Personal income tax rate in India was averaged at 31.53 percent, reaching an all-time high of 35.54 percent in 2016 and a record low of 30.00 percent in 2005.
While the concept of taxing income is quite common in other countries, the rate of tax and the applicable tax slabs vary from country to country.
What the slabs may look like
Experts expect that the finance minister likely to announce a restructuring of income tax slabs and increase the exemption limit from the existing Rs 2.5 lakh to around Rs 3 Lakh. This move would enable to have more money in the hands of people.
Rumours are rife that the Budget may reinstitute the concept of standard deduction to provide some relief to taxpayers. While observers have also claimed that there could be special incentives for senior citizens with respect to the income tax slabs.